Affects Of The Amazon Business Model

BY Stephanie S. Beecher

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Part three of this three-part article weighs the potential positives and negatives of joining forces with Amazon.

There may be little in the way of immediate financial risk in setting up an Amazon storefront, but consultants say doing so could eventually jeopardize a distributor’s brand. The biggest conflict is Amazon’s infamous model of commoditization.

“[Amazon] wants you to commoditize your products and sell them as low as possible,” says Marks.

Those who use the company storefront to sell an array of manufacturers’ products will have little in the way of storefront differentiation — especially because Amazon works to provide near identical user interfaces on each product page.

“When you go to Amazon, there’s a lot of similar [products] on there,” says Benfield. “You can’t control how much the buyers are going to gravitate toward your stuff. A lot of these guys sell products made by the same manufacturers.”

Consultants say that buyers ultimately come to Amazon to find bottom-of-the-barrel pricing. They say distributors who promote low pricing, and who make the mistake of using the same business name on Amazon as they do offline, risk tarnishing their brand and losing customers. That’s because if distributors use low prices to differentiate themselves, they could upset existing customers, who are likely paying more for products by buying directly from the distributor. But if prices aren’t low enough, distributors could just as easily lose Amazon shoppers to competitors with similar storefronts.

“In many cases, distributors are threatening their viability,” says Bob DeStefano, president of SVM Marketing Solutions, in Red Bank, New Jersey. “They are losing control of the customer and losing control of their brand. People are not choosing to do business with them because they have the right products or expertise.”

Marks says he sees potential in outsourcing a sales representative, or marketing professional, to run an Amazon storefront on behalf of a distributor, as long as it’s under an anonymous name. Doing so may provide incentive for making the storefront succeed. But others argue the amount of success is largely out of distributors’ hands.

Lewis shares a story about working with a plumbing supplies distributor who personally experienced the downside of Amazon. Although he says the supplier found success in his storefront at first, Amazon eventually worked out a sourcing deal directly with the manufacturer, which ultimately pushed them to the top of the page, and pushed the supplier right out of the sales channel completely.

“If you’re just reselling inventory from a jan/san manufacturer, there’s risk that Amazon is going to sell around you,” says Lewis. “It’s pretty hard to beat them at their own site.”

Investing In ecommerce

The answer over whether to open an Amazon storefront may lie somewhere in the middle of the debate. Lewis, DeStefano and others say they are open to experimenting with AmazonBusiness, as part of a multi-channel strategy — but say doing so shouldn’t stop distributors’ own internal ecommerce initiatives. If anything, they say, the debate around Amazon should serve as a wake-up call.

“My advice to distributors is to get into ecommerce,” says Lewis. “In the future, when this growth is really going to accelerate, you don’t want to hand over your online channel expertise, or your identity, to a third party. You have to learn this stuff.”

DeStefano says distributors shouldn’t feel like they’re competing against Amazon at all. He says distributors should zero in on their existing customer base first and then build out an online strategy that focuses on lead generation, rather than product sales.

“There are steps in the online world that are proven, like content marketing, that don’t require a huge infrastructure investment,” he says. “But it does allow you to serve up your expertise and build business.”

Lewis agrees, especially as it relates to regional customers. He says the first two years of an online launch should be centered on converting this customer base to the website; getting it to gradually increase online spend; and then focus on customer acquisition. Simply placing a product catalog online, or with Amazon, doesn’t do the job — and doesn’t equate to good ecommerce, either.

“There’s a uniqueness that you bring to the marketplace, so you want to continue to leverage your business with existing customers,” says Lewis.

Setting up a storefront on AmazonBusiness may help distributors pick up some additional sales, but it won’t be a substitute for their own ecommerce platforms or handle all customer online orders.

Stephanie S. Beecher is a Milwaukee-based freelance writer. She is a former Associate Editor of Sanitary Maintenance.

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